31/09/2016 - In addition to examining the sovereign borrowing needs in OECD countries, the 2016 edition of this publication addresses gross borrowing requirements; net borrowing requirements; central government marketable debt; interactions between fiscal policy, public debt management and monetary policy; funding strategies, procedures and instruments; the impact of new regulations on primary market operations; liquidity in secondary markets; and the transparency of public debt statistics, operations and policies.

30/06/2016 - This report examines sovereign borrowing needs in OECD countries from 2007 to 2016. It first looks at the net and gross borrowing needs of OECD governments in the context of ongoing fiscal consolidation. It then considers recent trends in central government marketable debt in the OECD and general government debt ratios for selected OECD countries, as well as current interest rates and the possible medium to long-term effect of negative interest rates. The report examines the relationship between monetary policy and debt management decisions, the role of public institutions as investors in sovereign bonds and growing concerns about secondary market liquidity.

Main findings

Sovereign borrowing needs in the OECD area as a whole have declined, owing to fiscal consolidation efforts. Net borrowing requirements have continued to decline from their peaks attained in 2008/9 and gross borrowing requirements from their peaks attained in 2012.

Net borrowing continues to be positive however and sovereign debt levels, which had risen rapidly as a result of the policy response to the global financial crisis and the real activity deceleration associated with it, continue to be high by historical standards.

Interest rates are low and they are even sometimes negative for high-credit-quality sovereigns. This borrowing environment facilitates the servicing of debt and influences the perceived need to reduce high public debt levels.

Looking ahead, purchases of government bonds by central bank and other public authorities that have constituted such a considerable share of sovereign bond demand are likely to decline, even if the outlook in this regard differs across regions.

Redemption profiles remain challenging over the next few years. Debt management offices have been reacting to these challenges among other things by making sovereign debt reimbursement requirements as light as possible over the short to medium term. As part of such efforts, redemption profiles were lengthened, thus limiting rollover risks. Such a strategy tends to involve higher debt-servicing costs over the short term, given that yield curves are upward sloping. At the same time, it makes debt-servicing costs more predictable, and this advantage is currently achieved at limited costs.

A survey among debt management offices that are members of the OECD Working Party on Debt Management revealed concerns among debt management offices regarding sovereign bond secondary market liquidity, especially in the case of bonds that are not “on-the run”. These concerns are valid, and more research is needed to more fully understand the implications of the evolving sovereign bond market structures for liquidity, trading and risk management practises, and market monitoring.